Greg Smith Isn't A Whistleblower, He's Just A Goldman Sachs Executive Having A Midlife Crisis

With Greg Smith’s resignation letter in the opinion pages of the New York Times, the world has a front row seat to watch the midlife crisis of a high-level executive at Goldman Sachs.

Smith, who apparently was not very high-level, is obviously disappointed about where his promising life has taken him. He pulled himself up with hard work all the way from South Africa. With the same determination that led him to ping pong glory at the Maccabiah Games, he got a scholarship to go to America and Stanford University. He is smart enough to be able to tell us that he was a Rhodes Scholar finalist!

But after making the decision to go to Wall Street, it took him until 2012—almost 12 years after signing up at Goldman Sachs—to figure out there was something “toxic” going on. Somehow during the credit boom years when Smith was banking big bucks that no doubt have set him up for life the state of affairs wasn’t as bad as it is now at Goldman. Smith had a lot of “love” for the place during that period, when Goldman played an important role in the Wall Street machine that nearly brought down the world.

The way Smith tells it, his decision to work on Wall Street was pure and good, driven by his desire to best help his huge hedge fund clients. But somehow Goldman recently lost its way in helping two of the planet’s biggest hedge fund managers earn 20% performance fees.

Smith is not the first person who wants to tell his former bosses to shove it. He is also not a whistleblower. He remained happily employed at Goldman after it took a massive taxpayer bailout. He stuck around to enjoy the firm’s $45 billion of 2009 revenues after Goldman got $10 billion from the Treasury Department’s Troubled Asset Relief Program and sold $29 billion of low-cost bonds backed by the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program. Goldman was also allowed to become a bank holding company and borrow cash from the Federal Reserve’s discount window for just about nothing while riding the yield curve the Fed had set up. Smith stayed for all that.

If what Smith is saying today is true, then the biggest problem remains the “muppets.” Not Kermit or Gonzo, but the investors that Smith claims continue to buy garbage from Goldman. Until those clients start to take responsibility for themselves, Goldman will remain incentivized to sell stuff to them.

One of the root causes of the mortgage nightmare, the CDO disaster, Madoff, and Stanford, was investor gullibility. Today, those investors like to blame the banks and the rating agencies for their roles. Goldman Sachs has paid a record $550 million fine to settle SEC charges it misled investors in a product it created. Its execs have been paraded in front of Congress and berated for literally selling shit. If those investors are not already entering into Goldman deals carefully now, they never will.